Palladium at 34-month high on SA strike

New York - Palladium futures rose to a 34-month high and platinum headed for the longest rally in three weeks after mining companies and striking workers failed to reach a pay accord in South Africa, a top producer of the metals.

Prospects for a labour agreement weakened after the union sought changes to the latest proposal brokered by the government, a person familiar with the talks said yesterday.

Palladium has climbed 13 percent since the start of the strike on January 23.

Demands for higher wages are “unsustainable” because of low productivity, said Mark Cutifani, the chief executive of Anglo American, which controls the top platinum producer.

The metals are used in jewellry and pollution-control devices in cars.

Supply deficits will increase to the highest in at least 30 years, according to Johnson Matthey, which makes a third of the world’s catalytic converters.

“The South Africa situation continues to dominate the supply story,” Frank Lesh, a trader at FuturePath Trading in Chicago, said in a telephone interview.

“The fundamentals are very supportive, and we expect prices to remain strong.”

Palladium futures for September delivery gained 0.3 percent to $842.25 an ounce at 12:30 p.m. on the New York Mercantile Exchange.

Earlier, the price reached $845.90, the highest for a most-active contract since August 1, 2011.

Platinum futures for July delivery rose 0.4 percent to $1,451.10 an ounce.

The price climbed for the third straight day, the longest rally since May 14.

Trading was 37 percent more than the average in the past 100 days for this time, data compiled by Bloomberg showed.

Economy Contracts

South Africa is the second-biggest palladium producer and the largest for platinum.

A strike by 70,000 members of the Association of Mineworkers and Construction Union crippled metal output and caused the economy to contract in the first quarter.

Anglo American Platinum, Lonmin and Impala Platinum say the strike has cost 21 billion rand in lost revenue, while workers have forgone more than 9.5 billion rand in wages.

Ngoako Ramatlhodi, the minister of mineral resources, said today labour talks “are at a sensitive stage and we all remain committed to the process.”

Negotiations resume on June 9.

Palladium is used in catalytic converters in the US and China.

Industrial applications account for 94 percent of the metal’s use, according to London-based Johnson Matthey.

Russia is the top source of palladium.

Prices have climbed partly as the nation faced sanctions from the US and Europe amid conflict with Ukraine.

Yesterday, investors boosted holdings of exchange-traded products backed by palladium to a record 90.7 metric tons, according to Bloomberg data.

Platinum assets in ETPs climbed to an all-time high of 86.5 tons on May 28. - Bloomberg News

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